LONDON, UK — Jessica Rusu, Chief Data, Information & Intelligence Officer, Financial Conduct Authority (FCA), announced a new approach to the FCA and how they interact with fintech, during a keynote speech at Innovate Finance.
She announced a focus on fostering innovation, being intelligence-led, and preparing for the future.
“Technological innovation has changed our lives and how we interact with each other – the cycle of innovation has resulted in an explosion of data, which in turn has become a key driving force for financial innovation,” Rusu explained.
1. Fostering innovation – “enabling environment for innovation in financial services, while proactively scanning the horizon to get on the front foot of emerging issues.”
Rusu emphasized keeping pace with emerging technologies and carving a path for beneficial innovation that unlocks technology’s opportunities while ensuring that consumers remain protected.
Consequently, she announced the launch of a new unified firm support service, ‘Innovation Pathways,’ that combines and enhances Direct Support and Advice Unit Services.
The initiative will support firms with innovative business models and a desire to create favorable products and services for their customers. There will be a greater focus on sharing insights into the FCA’s data.
For the FCA, this means working with a mix of authorized and non-authorized firms, providing access to their Regulatory Sandbox and Direct Support and Advice Unit.
According to the FCA’s data, a high percentage of firms using their Innovation services succeed in obtaining authorization with 92% using the Regulatory Sandbox and 98% using the Direct Support and Advice Unit.
A vital feature of the Digital Sandbox is that it leverages synthetic data. Rusu explains this is needed as “financial data is highly sensitive and rightly subject to data privacy laws to protect consumers.
Therefore ‘synthetic’ data is a privacy-preserving technique that expands the opportunities for data to be accessed and shared – a key building block for innovation.”
Given their observations into the use of synthetic data through our Digital Sandbox initiative, they are now asking to gather views and assess synthetic data’s potential to further spur innovation in the market.
She also explained that in response to recommendations from the Kalifa Review, they committed to establishing a regulatory ‘scale box’ that supports firms focusing on scaling innovative technology. Last year, they piloted ‘Early Oversight’ and ‘High Growth Oversight’ initiatives, extending supervision support to firms scaling at speed and those new to regulation. They are reviewing the findings of the pilots and will be announcing the next steps soon.
2. “Being Intelligence-led – “to leverage data science and advanced analytics to inform our decision-making and help us regulate at scale.”
For this theme, the focus was technology and data. Rusu explains they have built an analytical tool that provides critical indicators about firms to help identify risks – such as phoenixing, which frontline teams or automated interventions can then address.
Last year, using new data and algorithms, they doubled the number of financial promotions amended or withdrawn compared to previous years.
Furthermore, the new cloud-based technology infrastructure at the FCA allows them to work with data at scale and speed, engineering, connecting, and blending data to create new insights.
3. Preparing for the future – “providing insights to ensure that our regulations are fit for purpose in a rapidly changing market.”
Rusu clarified that sustainable finance and environmental, social, and governance (ESG) is a priority for FCA.
“We recently introduced three new initiatives in this space – a Sustainability TechSprint, a Digital Sandbox Sustainability Cohort, and a Green FinTech Challenge. These initiatives fostered new solutions and encouraged the live testing of innovative products supporting sustainability”.
The initiatives emphasize the importance of access to high-quality environmental, social, and governance data for generating insights and monitoring market resilience to climate change risks. The end goal is to aid the transition to a net-zero economy.
A report will be published in May summarizing the learnings from the Sustainability cohort, which will guide the next stage of the concept of a digital sandbox.
Rusu also explained that preparing for the future also means investigating fraud. She explained, “to paint a picture, nearly half a billion pounds were lost to fraud in 2020 alone” to counter this, the FCA will hold a Techsprint to explore solutions to curb authorized push payment fraud, such as identifying suspicious social media advertisements and scams.
Discussions on advertising at Innovate Finance continued throughout the two days, as covered in the article Financial inclusion consistent theme at IFGS 2022.
Leading from the front
Overall, Rusu believes the FCA needs “to be proactive and led from the front.” Innovation, continued collaboration, and inclusion are the golden threads that tie these qualities together.